Today, the financial regulator in Japan issued a directive to extend the suspension of the FTX subsidiary in the country till March 9, 2023. The agency announced the directive in its Friday blog post. Recall that the regulator had earlier asked the FTX subsidiary to suspend its operations on November 10 and cease crypto assets trading and stop accepting new customers till December 9, 2022.
Now, the agency claims the extension becomes necessary as the FTX arm is still struggling to determine the timing for resuming its withdrawal services. This thus requires the need to suspend new transactions from investors to the firm. Occasioned by this development, the FTX subsidiary must not receive any new deposits margins from investors till next year in line with the Payment Services Act and the Financial Instruments and Exchange Act.
Also, the agency also issued an order restraining the movement of company’s assets to its overseas affiliates. According to the Japanese regulator, the FTX subsidiary must hold all its assets in the country. Notably, it directed the amount of liabilities of the firm, recorded in its balance sheet must possess assets in Japan equivalent to the amount after deducting the amount of debts to residents.
The Genesis of the FTX saga
Recall that FTX, had since early November, been ravaged by crisis. Notably, the genesis of the crisis can be traced to a leaked balanced sheet of Alameda Research, showing that the firm tied up billions of dollars of its assets in FTX token, FTT. Worth noting that Alameda Research, founded by FTX founder, Sam Bankman-Fried, runs as a quantitative trading firm. It offers liquidity in digital assets markets. Occasioned by the revelation, Binance decided to liquidate its entire holding of the FTX token. Further, this revelation compelled many investors to seek withdrawal of their assets from FTX. This thus prone the crypto exchange into bankruptcy and plunged its token by 95%.
Following the crisis, regulators began to investigate the alleged illegal dealings of FTX founder and how it fermented the crash. In Bahamas for instance, its regulator (SCB) froze the assets of FTX subsidiary in the country. The regulator also terminated the registration of the arm. Additionally, SCB secured the approval of the court to appoint a provisional liquidator for the exchange. Also in Australia, its regulator suspended the financial service license of FTX subsidiary in the country. As reported, the suspension remains effective till May, 2023.
Meanwhile, FTX Japan claimed customers funds remains unaffected by its bankruptcy. The arm promised to initiate a separate withdrawal mechanism before the end of the year. However, with recent developments, it is still uncertain that the subsidiary will commence withdrawals before the end of 2022.